1. Charter Schools: Grants Management Compliance and OMB Uniform Grants Guidance Changes NYSED – September 2014
Tiffany R. Winters, Esq.
Brustein & Manasevit, PLLC

2. Agenda Background on Uniform Grants Guidance Allowability
Basic Cost Principles
Time and Effort Documentation
Grants Management Systems
Financial Management
Procurement
Inventory

3. Key Dates: Feb 1, 2013 NPRM Dec 19, 2013 Final Guidance
Dec 26, Federal Register
May New OMB Compliance Supplement
June 26, ED Draft EDGAR Changes
Dec 26, Final EDGAR Published

4. Date of Applicability of Revised Rules
OMB stated on 12/20/13 All Drawdowns, after December 26, 2014
? ? ?

5. What is Covered? A-21 – Cost Rules – Rules – IHEs
A-87 – Cost Rules – State / Local Gov’t
A-122 – Cost Rules – Nonprofit
A-102 – Administrative Rules State / Local Gov’t
Part 80 – EDGAR
A-110 – Administrative Rules IHEs
Part 74 – EDGAR
A-133 – Audit Rules (>$750,000)

6. Who is covered? All “nonfederal entities” expending federal awards
Non-Federal Entity

7. Most Significant General Changes
Shift from focus on Compliance to focus on PERFORMANCE!!!
Auditors (A Federal OIG) and Monitors (Federal and State Pass Through) must look more to “outcomes” than to “process”
The Omni Circular adds significant flexibility to way grantees / subgrantees can adopt their own processes

8. Most Significant General Changes (cont.)
The Omni Circular has a MAJOR emphasis on “strengthening accountability” by improving policies that protect against waste, fraud and abuse

9. New: Required certifications 200.415
NEW: Official authorized to legally bind the non-federal entity must certify on annual and final fiscal reports or vouchers requesting payment:
“By signing this report, I certify to the best of my knowledge and belief that the report is true, complete and accurate and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the federal award. I am aware that any false, fictitious, or fraudulent information or the omission of any material fact, may subject me to criminal civil or administrative penalties for fraud, false statements, false claims, or otherwise.”

10. Financial Management Controls The Key Component to Federal Grants

11. Crosswork Between 34 CFR 80.20 (b) and Omni Circular 200.302(b)
Identification of Awards (NEW)
Financial Reporting
Accounting Records (Source Docs)
Internal Control
Budget Control
Written Cash Management Procedures (NEW)
Written Allowability Procedures (NEW)
Financial Reporting
Accounting Records
Internal Control
Budget Control
Allowable Cost
Source Documentation
Cash Management

12. 1) Identification of Awards (New)
All federal “awards” received and expended
The name of the federal “program”
Identification # of award
CFDA Title and Number
Federal Award I.D. #
Fiscal Year of Award
Federal Agency
Pass-Through (If S/A)

13. New shift to OMB approved performance metrics
2) Financial Reporting
New shift to OMB approved performance metrics

14. 2) Financial Reporting (cont.)
Accurate, current, complete disclosure of financial results of each award
– Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly
– Non federal entity must submit performance reports at intervals required by federal agency or pass through.
Annual performance reports due 90 days after reporting period; Quarterly performance reports due 30 days after reporting period
and

15. 3) Accounting Records (Source Documentation)
Combines (b)(2) and (b)(6)
Source Documentation on:
Federal Awards
Authorizations
Obligations
Unobligated balances
Assets
Expenditures
Income
Interest (New)
Eliminated liabilities

16. 4) Internal ControlS Essentially same as 80.20 (b) (3)
Effective control over and accountability for:
All funds
Property
Other assets
Must adequately safeguard all assets
Use assets solely for authorized purpose

17. 5) Budget Control Same as 80.20 (b)(4)
Comparison of expenditures with budget amounts for each award

18. 6) Written Cash Management Procedures
For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205
No Change
For all other non federal entities, payments must minimize time elapsing between draw from G-5 and disbursement (not obligation)
See Payment

19. 6) Written Cash Management Procedures (cont.)
Advances must be maintained in insured accounts
Pass through cannot require separate depository accounts
Accounts must be interest bearing unless:
Aggregate federal awards under $120,000
Account not expected to earn in excess of $500 per year
Bank require minimum balance so high, that such account not feasible
Interest amounts up to $500 may be retained by non federal entity for administrative purposes
Interest earned must be remitted annually to ED/HHS, etc.

20. 7) Written Allowability Procedures (New)
Written procedures for determining allowability of costs in accordance with Subpart E – Cost Principles

21. Subpart E – Cost Principles

22. Cost Principles: “Factors Affecting Allowability of Costs” 200.403
All Costs Must Be:
Necessary, Reasonable and Allocable
Conform with federal law & grant terms
Consistent with state and local policies
Consistently treated
In accordance with GAAP
Not included as match
Net of applicable credits (moved to )
Adequately documented

23. New: Prior Written Approval 200.407
In order to avoid subsequent disallowance:
Non-Federal entity may seek prior written approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs

24. Program Income
Non-Federal entities are encouraged to earn income to defray program costs where appropriate.
Costs of generating program income may only be deducted if:
Authorized by federal regulations or the Federal award;
Costs are incidental and not charged to the Federal award.
Property from the sale of real property or equipment is not program income – apply post award property rules.
NEW: Program Income Must Be Deducted from Total Allowable Costs
With prior approval may Add to Federal Award.

25. New: Direct v. Indirect Costs 200.413
Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:
Such services are integral to the activity
Individuals can be specifically identified with the activity
Such costs are explicitly included in the budget
Costs not also recovered as indirect

26. The “Omni” now has 55 specific items of cost!
Selected Items of Cost
The “Omni” now has 55 specific items of cost!

27. Selected Items of Cost Examples
Advertising/PR (Clarified)
Allowable for programmatic purposes including:
Recruitment
Procurement of goods
Disposal of materials
Program outreach
Public relations (in limited circumstances)
Alcohol
Not allowable

28. Selected Items of Cost (cont)
Conferences (Changed)
Prior Rule: Generally allowable
Includes Meals / Conferences / Travel and Family Friendly Policies
Allowable conference costs include rental of facilities, costs of meals and refreshments, transportation, unless restricted by the federal award
Costs related to identifying, but not providing, locally available dependent-care resources
But “travel” allows costs for “above and beyond regular dependent care”
Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award

29. Selected Items of Cost (cont)
Collections of Improper Payments (New)
The costs incurred by the non-Federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate.

30. Selected Items of Cost (cont)
Entertainment Costs (Clarified)
Cost of entertainment are unallowable
Amusement, Diversion, Social Activities
Except where costs might otherwise be considered programmatic and are authorized or have prior written approval of the Federal awarding agency.
Fines, Penalties, Damages and other Settlements
If related to violation, alleged violation or failure to comply with Federal, state, tribal, local or foreign law and regulations then unallowable.
Except with prior written approval of Federal awarding agency.

31. Selected Items of Cost (cont.)
Travel Costs (Changed)
Prior rule: allowable with certain restrictions
Travel costs may be charged on actual, per diem, or mileage basis
Travel charges must be consistent with entity’s written travel reimbursement policies
Grantee must retain documentation that participation of individual in conference is necessary for the project
Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR (a)

32. Selected Items of Cost (cont.)
Travel Costs (Changed)
Prior rule: allowable with certain restrictions
Travel costs may be charged on actual, per diem, or mileage basis
Travel charges must be consistent with entity’s written travel reimbursement policies
Grantee must retain documentation that participation of individual in conference is necessary for the project
Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR (a)

33. OMB Circulars Time and Effort Rule
Time Distribution Records “Standards for Documentation of Personnel Expenses”
If federal funds are used for salaries, then time distribution records are required.
How staff demonstrate allocability
Paid in whole or in part with federal funds (i)(1)
Used to meet a match/cost share requirement (i)(4)

34. Cost Objectives
What is a cost objective? (slightly changed)
Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.

35. Time and Effort Guidance by OCFO!!!

36. OCFO Guidance
It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.
The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non- Federal funds.
Insert an example after this slide?

37. Time and effort (Current A-87 Rule)
Semi-Annual Certifications
Personnel Activity Report (PAR)
If an employee works on a single cost objective:
After the fact
Account for the total activity
Signed by employee or supervisor
Every six months (at least twice a year)
If an employee works on multiple cost objectives:
After the fact
Account for total activity
Signed by employee
Prepared at least monthly and coincide with one or more pay periods

38. NEW: “Standards for Documentation of Personnel Expenses” 200.430
Charges for salaries must be based on records that accurately reflect the work performed
Must be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated
Be incorporated into official records
Reasonably reflect total activity for which employee is compensated
Not to exceed 100%

39. NEW: “Standards for Documentation of Personnel Expenses” 200
NEW: “Standards for Documentation of Personnel Expenses” (cont)
Encompass all activities (federal and non-federal)
Comply with established accounting polices and practices
Support distribution among specific activities or cost objectives

40. NEW: “Standards for Documentation of Personnel Expenses” 200
NEW: “Standards for Documentation of Personnel Expenses” (cont)
Budget estimates alone do not qualify as support for charges to Federal awards (i)(1)(viii)
Percentages may be used for distribution of total activities (i)(1)(ix)

41. NEW: “Standards for Documentation of Personnel Expenses” 200
NEW: “Standards for Documentation of Personnel Expenses” (cont)
Grantees encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost (i)(5)
Acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on results of sampled employees

42. Procurement
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43. Procurement Standards
State, Local and Tribal Governments:
States may use their own procurement policies and procedures to procure equipment.
Other grantees and subgrantees must follow policies and procedures that meet the standards set out in EDGAR
Omni Circular
Still provides flexibility for States; all other nonfederal entities follow policies and procedures under Section
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44. Procurement Standards - NEW
Omni Circular : All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations.
(a)
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45. Open Competition
All procurement transactions must be conducted with full and open competition.
Must have protest procedures to handle disputes
To eliminate unfair advantage, contractors that develop or draft specifications, requirements, statement of work, and invitations for bids or RFPs must be excluded from competing for such procurements.
From EDGAR 74.43; now applicable to all nonfederal entities ( (a))
Not really a new requirement just moving it
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46. Open Competition Situations that restrict competition:
Unreasonable requirements on vendors to qualify to do business
Pre-qualified lists should not limit competition
Requiring unnecessary experience or excessive bonding
Noncompetitive pricing practices
Noncompetitive awards to consultants on retainer
Organizational conflicts of interest
Specifying a brand name
Any arbitrary action in the procurement process
In-state or local preferences
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47. Conflict of Interest
Must maintain written standard of conduct, including conflict of interest policy.
A conflict of interest arises when any of the following has a financial or other interest in the firm selected for award:
Employee, officer or agent
Any member of that person’s immediate family
That person’s partner
An organization which employs, or is about to employ, any of the above or has a financial interest in the firm selected for award
Institutional conflict new to state and locals
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48. Conflict of Interest - NEW
If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest! (b)(2)
All non federal entities must establish conflict of interest policies, and disclose in writing any potential conflict to federal awarding agency in accordance with applicable Federal awarding agency policy
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49. Vendor Selection Process
Method of procurement:
NEW: Micro-purchase
Small purchase procedures
Competitive sealed bids
Competitive proposals
Noncompetitive proposals
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50. Vendor Selection Process: NEW: Micro-Purchase
Acquisition of supplies and services under $3,000 or less.
May be awarded without soliciting competitive quotations if nonfederal entity considers the cost reasonable.
To the extent practicable must distribute micro-purchases equitably among qualified suppliers.
(a)
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51. Vendor Selection Process: Small Purchase Procedures
Good or service that costs $100,000 or less (NEW: $150,000 under )
Organization may set lower threshold
Must obtain price or rate quotes from an adequate number of qualified sources
“Relatively simply and informal”
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52. Vendor Selection Process: Noncompetitive Proposals
Appropriate only when:
The good or services is available only from a single source (sole source)
There is a public emergency
The awarding agency authorizes
NEW: awarding agency or pass-through must expressly authorize noncompetitive proposals in response to written requires from nonfederal entity (f)(3)
After soliciting a number of sources, competition is deemed inadequate
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53. Vendor Selection Process: Noncompetitive Proposal
As a practical matter, noncompetitive contract raises “red flags”
Ensure persuasive and adequate documentation to facilitate audit
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54. Vendor Selection Process
Cannot contract with vendor who has been suspended or debarred
Appendix II(I)
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55. Contract Administration
Must maintain a contract administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of the contract
(b): Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract
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56. Property Management
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57. Inventory Management
Must have adequate controls in place to account for:
Location of equipment
Custody of equipment
Security of equipment
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58. What is equipment?
Equipment: tangible, nonexpendible, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.
Grantee may also use its own definition of equipment as long as the definition would at least include all equipment defined above.
EDGAR 74.2 and 80.3
Omni Circular
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59. Supplies Anything that is not equipment is considered supplies. 200.94
“Highly Walkable” Items
NEW: Computing devices
Machines used to acquire, store, analyze, process, public data and other information electronically
Includes accessories for printing, transmitting and receiving or storing electronic information
Computing devices are supplies is less than $5,000
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60. Internal Controls
Regardless of cost, grantee must maintain effective control and “safeguard all assets and assure that they are used solely for authorized purposes.” (b)(4)
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61. Ownership
Generally, title to equipment purchased with federal funds vests in the organization that made the purchase.
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62. Inventory Management Must have inventory management system
Property records
Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition
Physical inventory
At least every two years
Control system to prevent loss, damage, theft
All incident must be investigated
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63. Inventory Management Must protect against unauthorized use
May use for other projects as long as use is incidental and does not interfere
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64. Use of Grant-Acquired Equipment
Use on the grant project or program that helped pay for the equipment.
Use on federally-funded projects funded by the federal agency that funded the original project.
Use on other federally-funded activities.
Use on other activities.
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65. Use of Grant-Acquired Equipment - Clarified
Clarified: shared use is allowed if such use will not “interfere”:
1st preference – projects supported by federal awarding agency
2nd preference – project funded by other federal agencies
3rd preference – use for non federally funded programs
NEW: Cannot “encumber” the property without approval of Federal agency or Pass-through agency
(c)(1)
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66. Inventory Management - NEW
When grantee acquiring replacement equipment, the equipment to be replaced may be used as a “trade-in” without recourse to federal agency
(c)(4)
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67. Disposition-Equipment
When property no longer needed, must follow disposition rules:
Transfer to another federal program
Over $5,000 – pay federal share
Institutions of Higher Education, Hospitals and Other Nonprofits must request disposition instructions from the Secretary of the before disposal of equipment.
Under $5,000 – no accountability
(e): Nonfederal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant.
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68. Disposition - Supplies
If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, must compensate the federal government for its share.
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69. Records and Reviews
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70. Methods for collection, Transmission and storage of information - NEW
When original records are electronic and cannot be altered, there is no need to create and retain paper copies.
When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they:
Are subject to periodic quality control reviews,
Provide reasonable safeguards against alteration; and
Remain readable.
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71. Questions?

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